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Private Equity Investment in Mexico is Increasing

While private equity investment has largely focused on BRIC countries – especially Brazil in Latin America – the numbers reveal that Mexico is a nascent private-equity market primed for significant growth. This is already seen in the dramatic rise of private equity investment in Mexico over just the past few years, and future years look even more promising.

The Rise of Private Equity in Mexico

China, India, and Brazil have been quite popular for private equity investment for the past few decades, but over the past 10 years or so, a different picture is emerging. The annual rate of fundraising in Mexico has increased approximately six times, and the number of general partners active in the market doubled. When the global downturn occurred in 2008, while other markets declined, private equity investment in Mexico increased dramatically. In fact, in 2008, private equity investment in Mexico accounted for approximately 3% of the total investment for Latin America, dwarfed by Brazil’s 63%. But the tables have turned in a few short years. Last year, Mexico dominated Latin America with 29% of private equity investment compared to Brazil’s 26%.

Private equity investment in Mexico is growing rapidly. According to Amexcap, accumulated capital commitments have more than doubled in the past half-decade to $37.1 billion in 2015. During the first half of 2013, alone, venture capital and private equity investment in Mexico rose to a staggering $879 million USD, according to research compiled by the Latin American Private Equity & Venture Capital Association (Lavca). Lavca President, Cate Ambrose, had this to say about this trend:

The takeaway from these numbers is that Mexico has clearly become the flavour of the month…There is a shift in PE interest away from Brazil and into Mexico and Colombia.

This little understood investment vehicle is providing a flow of capital into Mexico that helps family owned businesses to span generational gaps where members of the family choose to not continue the business. Private Equity Investors seek such situations and provide a service that provides capital to the exiting family while then extending jobs and security for Mexican workers over many years into the future. The Tecma Group of Companies has gained expertise in the many benefits that Private Equity Companies and is willing to provide information to companies of Mexico who may be interested in learning more.

What is Driving Private Equity Investment in Mexico?

Mexico has many factors driving this surging investment trend. This manufacturing country has already begun experiencing the benefits of Mexican President Nieto’s aggressive reform measures that overhauled the economy over the past several years. But there are other incentives drawing PE investors as well. Mexico is very proactive in courting such investment and clearing the way for investors to establish their ventures in this manufacturing country. Currently, Mexico is considering a tax cut for private equity investors. The bill would:

Reduce the fee to list a company on Mexico’s stock exchange

Reduce the tax on sales through initial public offerings to 10%, in line with the capital gains rate

Allow funds to use losses from unprofitable investments to offset taxes paid on profitable investments

Another factor boosting private equity investment in Mexico was a rule change that was implemented in 2009 regarding “Afores.” This is the Mexican name given to domestic pension funds, and the change now allows these funds to invest up to 20% of their assets in private equity. This move freed up significant capital for investment in the country’s booming economy, and many analysts believe these factors collectively ensure future growth in Mexico’s private equity investment, as the nation’s economic outlook and regulatory environment continually improve.

“The Tecma Group of Companies' services allow me to concentrate on making and selling wood pallets. I have Tecma handle all administrative functions, Mexican Customs, human resources, all permitting, as well as the legal aspects of manufacturing in Mexico. It’s a very good, complementary relationship. They provide me with a project manager, which means I don’t have to deal with a lot of individuals. I deal with one individual, who then deals with experts in all relevant disciplines on my behalf.”

“When we purchased the Dashmat product line, which is the product that we are manufacturing in Ciudad Juarez, we were able to establish a Mexico manufacturing plant with Tecma very quickly. They got us up and running very smoothly under their Mexico Shelter Manufacturing Partnership (MSMP). We like Tecma because it is a stable company that has been around for many years, and looks to be around for many more. Tecma appears to care about our Mexico business' success is very responsive to our needs.”

“Since we started, we have been able to maintain a competitive advantage over many of our competitors that have moved their manufacturing to China by reducing lead times to 4 weeks less than most of our competitors. This has given us the ability to compete on pricing against many of our competitors that have gone to China. We found that in our Juarez staff in Mexico we found a highly-trained workforce with strong background, and the capability to do mannequin manufacturing in Mexico.”

“More than a decade ago, Portage Electric Products Incorporated was faced with the reality that we were going to have to consider manufacturing in another country in order to maintain our competitiveness in the global marketplace. We chose Mexico, as we could be here literally within hours, should the need arise. We chose the Tecma Mexico Shelter Manufacturing Partnership (MSMP) because it provided virtually everything we needed to begin with and support an ongoing Mexico manufacturing operation.”

This quarterly publication will be populated with content that is useful and relevant to readers that are contemplating Mexico investments, have operations already within the Republic, as well as to other individuals that have an interest in Mexico and its manufacturing sector.

Reduce Production Costs 50% or MoreIf are you considering setting up manufacturing in Mexico fill out the form below or call 915-534-4252.

What is Tecma Shelter Service?Your role is to concentrate on manufacturing. Tecma takes care of everything that has to do with Mexico. No more complicated than setting up a new manufacturing operation just across town.

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